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The latter had earlier triggered a strong buy signal, and now looked set to outperform Germany's DAX index. Although my BEL 20 analysis confirmed the outlook for rising European stock markets generally, the expected return for the index was no greater than that of the DAX, with a rise to within a band defined as 2842-2905 the most likely outcome. Last week saw the BEL 20 achieve that minimum target, with an intraday high of 2864 recorded last Thursday. Profit should now be booked, and my recommendation reverts to neutral.
Following its recent strong rise, the Belgian index now sits just below important resistance at 2905, as determined by its G2 level. Consequently, and as this has become the first eurozone index to fulfil my minimum upside target, the risk in holding long positions on the BEL 20 has increased substantially. This is not to say the index won't go higher, but a period of sideways trade around 2842-2905 is necessary before any new buy signal can be generated. A pattern such as this would be a likely precursor to a new and higher trading band being established.
A near-term break above 2905 is likely to prove temporary, and any sharp advance to 3047 will offer the chance to sell the index short. A rise to 3047 will have completed a 100% advance from the historic lows in March 2009.
Recommendation: take profit. Target band 2842-2905 is fulfilled. Sell the index short on any further advance to 3047.